Dow Today – LIVE MARKETS-Dow Industrials: Hot to the touch
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DOW INDUSTRIALS: HOT TO THE TOUCH (0900 EDT/1300 GMT)
After hitting record highs last Friday, the Dow Jones Industrial Average is on track to dip slightly this week. Nevertheless, by one oscillator, the blue-chip average is its most overbought, on a weekly basis, since November 2017:
Indeed, the current reading on a longer-term weekly slow stochastic is 98.806, which is the highest level since a 99.237 print the week ending Nov 3, 2017. (Readings above 80.00 are considered overbought, with 100.00 the maximum).
Meanwhile, the Dow faces a hurdle in the form of a log-scale resistance line from early 2019, which on a weekly basis, now resides around 34,500. Last week’s high was 34,256.75.
Thus, the severely overbought reading, coupled with the resistance barrier only around 1% above Wednesday’s close, can suggest the Dow may be in for a struggle to immediately sustain its advance.
That said, despite the searing hot oscillator reading, the indicator has yet to diverge. Of note, since early 2018, the Dow suffered four sharp high-to-low declines, averaging around 19%, from record high levels that were preceded by weekly stochastic divergence. one scenario could be that the Dow marks time, or suffers a modest setback, prior to new highs. A bigger problem could then arise if the stochastic diverges.
However, a Dow reversal back below the broken 92-year resistance line which is now acting as support through the end of April at around 33,150, coupled with the weekly stochastic falling under the 80.00 overbought threshold, may put the potential for a more protracted and deeper Dow decline on the front burner. Gabriel)
FOR THURSDAY’S LIVE MARKETS’ POSTS PRIOR TO 0900 EDT/1300 GMT – CLICK HERE: DJI04222021
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)